Olson’s Theory "The Logic of Collective Action"

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Many academic disciplines seek to explain altruism, as it seems irrational for people to act in ways that appear to be at odds with their own interests. In evolutionary biology, reciprocal altruism explains that an individual may act in a way that temporarily decreases her fitness for future benefits; essentially, an individual that sacrifices for a group advantage is actually acting to benefit herself (and her offspring) in the long-term. In a colony of prairie dogs, for instance, the animals on “guard duty” put themselves at higher risk when watching for predators, but at the same time increase their fitness overall, as these warnings protect the colony as a whole, including their offspring, and, if they survive their guard duty, their own future when others are on watch.

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By contrast, in political economy, Olson theorizes that groups of people, especially large groups, often do not act to further common interests, asserting that group interest in obtaining a public good rarely coincides with an individual’s self-interest. A prime example of Olson’s theory is carbon emissions; it is widely agreed that decreasing carbon emissions to slow climate change is desirable, but without incentives to offset the expense or inconvenience, most will not act to decrease their carbon footprint. Thus, carbon emissions must be decreased through regulation, which is a challenge in terms of both drafting and passing such laws. Considering Olson’s collective action theory in which individuals will not act to benefit their group because of self-interests, a policymaker seeking to reduce carbon emissions would be best able to achieve this goal through the implementation of selective incentives, the spreading of information and propagation of social norms to influence public opinion, the attainment of a global consensus, and the implementation of legislation by smaller groups.

In Olson’s The Logic of Collective Action, he offers three main reasons for why an individual will not sacrifice for the interests of large groups:

  1. the collective benefit is spread out over more members, decreasing individual benefits;
  2. because of this small individual benefit, each member is less likely to contribute;
  3. there are larger costs involved in organizing and coordinating larger groups.

Large groups also suffer in that each individual views their own contribution as irrelevant, and “the anonymity of the large-group context” enforces this view. Olson breaks groups into three categories: a “privileged group,” meaning that “each of its members, or at least some one of them, has an incentive to see that the collective good is provided, even if he has to bear the full burden of providing it himself;” “intermediate groups” that are large enough that no one member would voluntarily provide the good, but small enough that the collective good can be achieved through organization and coordination; and “latent groups” in which an individual’s contribution is not noticeable and thus no one will contribute (although he explains in his by-product theory that groups can be “mobilized” to act with the use of incentives, as they contribute to gain these private rewards).

He also claims that inequalities within large groups can increase their effectiveness, as the largest member “bears a disproportionate share of the burden;” this leads to the “‘exploitation’ of the great by the small.” His theory is especially relevant for the provision of public goods, as it is impossible to exclude people from enjoying their benefits, regardless of whether or not they contributed, which means there will be more people who “free-ride” on the work of others. Thus, when public goods are involved, it is especially necessary to have a “separate and ‘selective’ incentive” to motivate individuals to act in a group-oriented way; this incentive can either be a benefit or a punishment, and is provided either only to those who contribute (in the case of a benefit) or those who do not (in the case of a punishment).

Applying Olson’s theory to the public “bad” of carbon emissions, which in fact are a negative externality, a specific type of public good with costs that cannot be avoided by others, it follows that trying to decrease them would pose a collective action problem, especially since the majority (a large group) has an interest in decreasing them. In addition, since actions that decrease profits are typically not taken, the collective action problem applies to corporate entities as well. Further complicating matters for policymakers, climate change is by definition a global phenomenon, so entire countries perceive their contributions as irrelevant. In light of these challenges and the unlikelihood of voluntary action by individuals, businesses, and even countries, a policymaker would need to use incentives to reduce emissions.

In order to impact an individual’s behavior, a policymaker must consider that, given the scale of climate change, most believe that their contributions are irrelevant, and will not reduce their carbon footprint if it conflicts with their more personal self-interests – for example, driving to work instead of walking or taking public transit. In addition, because clean air and no climate change are public goods, it is desirable for the government to become involved at various levels – as they are likely the only group with enough authority to enforce contributions – taking into account Olson’s idea of “selective” incentives. Such incentives could include rebates to those who have emissions below certain levels, or disincentives by taxing those who fail to comply with the levels of emissions that are considered acceptable.

Policymakers could also make use of “social sanctions and social rewards” as a form of “selective” incentives. Olson claims that social pressures are not prevalent in large groups where members do not know each other well, further supporting his theory of large groups’ ineffectiveness in achieving common goals, which is due in part to anonymity and the resulting lack of accountability to the group. Indeed, studies have shown that people’s opinions and actions about carbon emissions can be influenced by social pressures, partly by doing what Olson suggests: having a “federal” group, or a large group composed of many small groups.

The large group of an entire population can be broken up into many smaller groups to decrease the anonymity effect, as people in these smaller groups, such as neighborhoods, are more likely to know each other and/or feel as though others know when they are not contributing. In this regard, presenting an individual with direct comparisons with others has proven to be effective in modifying behavior. For example, a statement on water and electric bills “comparing their use to their neighbors’ use…causes households to reduce consumption between 5 and 20 percent,” clearly indicating that social incentives are effective. However, even in smaller groups, rational people may view their individual carbon footprints as a negligible component of the world’s carbon footprint, and thus will be reluctant to change their habits. Therefore, it is essential that a policymaker includes strong incentives to motivate behavioral changes.

Evidence also suggests that social norms can play a role in overcoming collective action problems. Human societies often develop “cooperative norms” in the real world, such that irrational behavior occurs because of the recognition that the overall welfare of the group is important. In addition to the fact that increasing group fitness can increase individual fitness in the long term (as with prairie dogs), people are capable of higher order thinking and, accordingly, some argue that “personal responsibility” plays a large role in influencing an individual’s actions. Hence, tying norms to personal responsibility, such as by “publicizing information about individuals’ carbon dioxide emissions,” can be used to sway behavior towards more environmentally friendly choices. This is in keeping with Olson’s theory – reiterating and reinforcing social norms helps reduce anonymity and further suggests to people that their actions can be monitored and enforced, increasing organization and incentives to act. Another study found that when people are presented with a paragraph claiming that a majority of their peers believe climate change is a serious issue and that they would take actions to reduce their carbon emissions, they are more “willing to take personal action;” thus, dissemination of information enforcing cultural norms provides a tool policymakers can use to overcome the collective action problem involved with reducing carbon emissions.

When rational people decide how to act, they weigh the costs of the action under question against the benefits; while this is mainly an economic decision, it does depend on personal beliefs. Someone who strongly believes that carbon emissions are detrimental, for example, will consider the benefits of reducing these emissions to be greater, and thus will be more likely to act than someone who is less convinced of their harmful effects. The fact that reducing carbon emissions is associated with immediate costs – both personal through lifestyle changes, and economically through production – but delayed benefits exacerbates its susceptibility to group inaction, as this temporal mismatch makes people even more likely to view the costs as outweighing the benefits.

Therefore, a policymaker interested in reducing emissions should carefully consider policies that sway personal opinions by stressing the benefits of reducing emissions and/or the costs of unreduced emissions. Studies have shown that the spreading of information about climate change’s costs does indeed influence public opinion and lead to a greater willingness to change one’s carbon footprint. Although “science-based communications” are shown to be slightly less effective than norm statements, this difference is minor and may not be statistically significant – it still evidences that providing more information about the positives of reducing carbon emissions and the negatives of not would help to overcome the collective action problem by affecting the perceived costs and benefits.

In any of the above, a policymaker seeking to decrease carbon emissions would have to consider small interest groups that would oppose this legislation. Even if the majority of people agree that clean air is preferable and human activity is causing climate change, there are still those who would argue against decreasing emissions, whether due to self-interest, such as believing their personal sacrifices are not worth the benefit they would receive, or personal beliefs, such as that the government should not intervene in personal activities. Regardless of their reasons, these people can form a group with a collective interest in opposing legislation that would mandate decreased personal carbon emissions, and this group is likely to be relatively small, given that those who feel strongly enough to organize this group must have incredibly high costs or low benefits associated with reducing emissions, both of which are uncommon occurrences.

This small opposition group could even be what Olson refers to as privileged, so voluntary provision of the good may occur without any coercion if at least one person views her personal costs as lower than her personal benefits. In this case, the collective good is the mechanism to prevent this legislation, whether through the hiring of lobbyists or personal actions. In fact, in the US especially, groups of climate change deniers, while relatively small compared to the total population, have a “disproportionately great”6 influence on politics, indicating that they may not be as affected by collective action issues because of their smaller size, and thus compose yet another obstacle to policymakers attempting to impact carbon emissions.

With regards to corporate entities, a policymaker would face even greater challenges. Businesses produce a much higher proportion of carbon emissions than individuals, which intensifies the issue of individual irrelevancy – people not only believe that their individual emissions are trivial in affecting the overall air quality because of how many other people there are in the population, but also because personal emissions make up such a tiny percentage of overall emissions. Since many businesses rely on actions that produce large amounts of carbon dioxide for their profits, reducing their carbon emissions would be costly to them in that they would need to produce less and/or invest in production methods that limit carbon emissions. Decreased profits are highly undesirable for businesses, and many would seek ways to avoid having to decrease their emissions, regardless of their personal beliefs.

This results in yet another group with a common goal: the group of CEOs and business owners who do not want to lose profits. While this group may still be quite large, it is considerably smaller than the overall population, and it can better organize to provide its collective good, which would be the absence of legislation requiring reduced emissions. Although this group may still be large and anonymous enough so that there are decreased incentives to contribute, the collective goal of profitability is significant enough to influence members of the group (individual businesses) to contribute by having members consider their benefits to be greater than their costs. In this case, the contributions taken to achieve the goal would not directly affect air quality, but would most likely be to influence policymakers, the most obvious example being paying lobbyists to advocate against laws decreasing emissions. Clearly, corporations and the groups formed by these corporations form another challenge for policies limiting carbon emissions.

Moreover, even if policymakers succeed in drafting effective legislation to decrease carbon emissions in the area under their jurisdiction (city, state, country, etc.) there is still the issue of if the rest of the world will act. For carbon emissions in particular, there is a massive problem of individual countries’ contributions being irrelevant: the five countries (the US, China, India, Russia, and Japan) with the highest emissions produce 52% of the world’s emissions, and the 73 smallest countries “cannot make a meaningful contribution to the collective action.” Thus, the small countries have essentially no incentive to reduce emissions, as they know their contributions will make a negligible difference. The two countries with the largest emissions, the US and China, produce about 40% of emissions, and the refusal of just one of them – namely, the US in withdrawing from the Paris Agreement – to decrease emissions exacerbates this irrelevancy issue, and also fits with Olson’s theory about the “exploitation” of larger group members.

So, a policymaker concerned with reducing carbon emissions would also need to consider the global economy and how to convince those who are deciding on whether or not to implement this legislation that the contributions required of them would be meaningful. Based on recent evidence – actions of former US President Obama and President Xi of China – it seems that a credible statement from someone in a position of power that they are determined to abide by agreements to reduce emissions is sufficient for others to believe that they will contribute. In theory, such a global consensus minimizes the problems associated with Olson’s theory, as if the president or head of government – the one person with sufficient power – shared this collective goal, they could achieve it by themselves if they viewed the cost to be less than the benefit, making this a privileged group.

Furthermore, policymakers at the local, state, country, or global level face different challenges. Sufficient resources are necessary to induce a large group into acting, and these resources are not likely to be able to be provided on a local level. Even on the state level, there is the issue of other states’ compliance and the spillover from other states who do not follow the same policies; in the case of carbon emissions, the spillover applies on the country level, too, as clean air and climate change are unable to be contained to specific geographical areas.

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